Reliance Jio, GSM telcos clash over spectrum usage charge

In a letter to Telecom Secretary J.S. Deepak, Jio has accused the COAI of “trying to mislead the government,” and warned that “the national exchequer would suffer a whopping loss of over Rs 1,10,00 crore,” if the GSM lobby body’s proposal is accepted.Kalyan Parbat | ET Bureau | April 28, 2016, 07:55 IST

KOLKATA: Reliance Jio Infocomm and the Cellular Operators Association of India (COAI) are at loggerheads over the GSM industry body’s recent call for a uniform annual levy for using airwaves.

In a letter to Telecom Secretary J.S. Deepak, Jio has accused the COAI of “trying to mislead the government,” and warned that “the national exchequer would suffer a whopping loss of over Rs 1,10,00 crore,” if the GSM lobby body’s proposal is accepted.

“Reliance Jio Infocomm does not subscribe to COAI’s views, which are impractical and biased for the benefit of incumbent operators,” the Mukesh Ambani-led company wrote in a strongly-worded letter seen by ET.

In a string of letters to the telecom department (DoT), COAI had recently called for a uniform annual levy of 3% of yearly revenue for using airwaves. The lobby body has also advocated that such spectrum usage charge (SUC) – the annual fee that telcos pay the government for using the natural resource – be progressively lowered to a flat 1%.

However, Jio feels “any ex post facto change in the SUC regime for already allocated/auctioned spectrum should not at all be considered by DoT, as it would result in windfall gains to existing incumbent operators and cause huge losses to the national exchequer, and also result in policy uncertainty” before the next auction.

“The exchequer will suffer a loss of over Rs 1,10,000 crore over 20 years by accepting COAI’s proposal, as per estimates based on the Telecom Regulatory Authority of India’s data on SUC payouts,” said Jio , in its letter to Deepak.

The COAI represents India’s top telecom firms such as Bharti Airtel, Vodafone India and Idea Cellular amongst others. Reliance Jio is also a COAI member, but the GSM industry body in its recent letters on the uniform SUC call has consistently maintained that Jio held a divergent view on the matter.

Top mobile carriers have historically held different views on SUC. While the telcos need to pay the multiple rates as SUC, Jio, being the holder of broadband wireless (BWA) spectrum​ in the 2300 Mhz band​, needs to pay a flat 1%.

Incumbent GSM telcos have long argued for Jio to be brought at par with them, or their SUC to be brought to Jio's levels eventually, citing the need for a level playing field. But Jio has opposed this view, saying it will go against extant rules.

In its recent letters to the DoT secretary, the COAI had said a uniform SUC would simplify calculations and remove all arbitrages and ambiguities. It had added that the current regime of differential levies would make segregation of revenue based on multiple spectrum bands (used for delivering the same 4G LTE services) a huge challenge.

But in its letter to the Telecom Secretary, Jio said “both DoT and the sector regulator have consistently held that as long as the SUC proposed to be levied is notified in advance, the market factors this into the spectrum valuation and the consequent auction bids”.

The present escalating SUC regime, Jio said, had been specified by DoT to recover fee for spectrum that was allocated without any upfront payment.

Accordingly, by demanding a uniform SUC levy, the “COAI is proposing that incumbent GSM operators enjoy the benefits of additional spectrum without paying the national exchequer for it”, said Jio in its letter.

Separately, RCom initiated contempt proceedings in the apex court against the Department of Telecommunications, blaming it for delaying a spectrum sale that would have enabled dues to be paid to Ericsson and lenders.